Case Studies on Sukuk Issuance Regional Workshop - Developing Government Securities under Islamic Finance Amman, Jordan By Ayman H. Abdel Khaleq 24 September, 2012
Contents Sovereign Sukuk Issuance Dubai (Programme) Pakistan (Standalone) Quasi-Sovereign Sukuk Issuance Dubai World (Mudaraba) Nakheel (Equity Linked) Other Sovereign and Quasi-Sovereign Sukuk Issuances Earmarked Private Sukuk Issuance Durrat Khaleej Al-Bahrain (Istisna a and Ijara) Al Thani (Musharaka)
Sovereign Sukuk Issuance
Department of Finance, Dubai Issue Date: 3 November 2009 Sukuk Size: US$2,500,000,000 Sukuk Structure: Ijara (Programme) Trust Assets: Dubai Airport Terminal Facilities Listing: Dubai Financial Market, London Stock Exchange Issuer/Trustee: Dubai DOF Sukuk Limited Obligor: Government of Dubai Managers: Dubai Islamic Bank, Mitsubishi UFJ Securities International, Standard Chartered Bank and UBS Investment Bank Tenor: 5 years Pricing: 6.39% per annum Date of Distribution: 3 May and 3 November each year
Department of Finance, Dubai - Continued Maturity Date: 3 November 2014 Governing Law: English Law and UAE Law Shari a Advisor: Shari a advisory boards of Dubai Islamic Bank and Standard Chartered Bank Use of Sukuk proceeds: Fund the development of Dubai Airport Terminal Facilities Distinguishing Factor: Largest Islamic bond sale in the GCC for 2009 Transaction Documents: Offering Circular Master Trust Deed Master Purchase Agreement Master Lease Agreement Master Servicing Agreement Master Purchase Undertaking Master Sale Undertaking Master Substitution Undertaking Master Agency Agreement Master Costs Undertaking
Department of Finance, Dubai - Continued Dubai Government as Seller Dubai Government as Lessee Dubai Government as Obligor Dubai Government as Servicing Agent Sale of Assets Purchase Price (of Assets) Ijara (Lease of Assets) Rentals Sale of Assets Dubai DOF Sukuk Limited as Issuer and Trustee Exercise Price Appointment as Servicing Agent Reimbursement of Servicing Costs (set-off against Supplemental Rental) Substitution Sukuk (Trust Certificates Cash Periodic Distribution Amounts Dissolution Amount Dubai Government as Seller Investors
Islamic Republic of Pakistan Issue Date: 27 January 2005 Sukuk Size: US$600,000,000 Sukuk Structure: Ijara (Standalone) Trust Assets: Lahore-Islamabad Motorway Highway Land Issue Rating: B+ (S&P) at Issue Date Listing: Luxembourg Stock Exchange Issuer/Trustee: Pakistan International Sukuk Company Limited Managers: Citigroup and HSBC Bank (as Lead Manager), ABC Islamic Bank, Arab Bank, Dubai Islamic Bank, Habib Bank AG Zurich and National Bank of Pakistan (as Co-Lead Managers) and Meezan Bank (as Arranger) Guarantor: The Islamic Republic of Pakistan Tenor: 5 years Pricing: 6 months LIBOR + 220 bps Date of Distribution: 27th day of January and July each year
Islamic Republic of Pakistan - Continued Maturity Date: 27 January 2010 Use of Sukuk proceeds: Fund the purchase price for the Lahore-Islamabad Motorway Highway Land Distinguishing Factors: True sale of the Lahore-Islamabad Motorway Highway Land Transactions Documents: Offering Circular Trust Deed Purchase Agreement Lease Agreement Servicing Agreement Purchase Undertaking Sale Undertaking Agency Agreement Costs Undertaking
Islamic Republic of Pakistan - Continued Pakistan as Seller and Obligor Land Exercise Price Ijara (Lease) Rental Pakistan International Sukuk Company Limited as Issuer and Trustee Land Purchase Price National Highway Authority Distributions (Periodic and Final) Sukuk Certificate Cash Contribution Investors
Quasi-Sovereign Sukuk Issuance
DP World Issue Date: 3 July 2007 Sukuk Size: US$1,500,000,000 Sukuk Structure: Mudaraba Trust Assets: Mudareb to be invest in Terminal 2 at Jebel Ali Free Zone Issue Rating: A+ (S&P) A1 (Moody s) at Issue Date Listing: Nasdaq Dubai, London Stock Exchange Managers: Barclays Capital, Citibank, Deutsche Bank and Dubai Islamic Bank Issuer/Trustee: DP World Sukuk Limited Obligor: DP World Limited Tenor: 10 years Pricing: 6.25% Date of Distribution: 2 of July and January of each year
DP World - Continued Maturity Date: 2 July 2017 Governing Law: English Law Shari a Advisor: Shari a advisory board of Dubai Islamic Bank Use of Sukuk proceeds: The initial investment by the Mudareb would be in Terminal 2, a second terminal adjacent to the current Jebel Ali Terminal Distinguishing Factors: First UAE corporate rated sukuk offered into the U.S. and only the second Rule 144A sukuk offered Transaction Documents: Offering Circular Trust Deed Mudaraba Agreement Purchase Undertaking Sale Undertaking Agency Agreement Costs Undertaking
DP World Continued DP World Limited as Mudareb Mudaraba Agreement DP World Limited as Obligor Purchase and Sale Undertaking Exercise Price DP World Sukuk Limited as Issuer and Trustee Declaration of Trust Periodic Distribution Amounts and Dissolution Distribution Amounts Investors
Nakheel Issue Date: 14 December 2006 Sukuk Size: US$3,520,000,000 Sukuk Structure: Ijara (Equity Linked) Trust Assets: Land, buildings and other property at Dubai Waterfront Listing: Nasdaq Dubai Managers: Barclays Capital and Dubai Islamic Bank Issuer/Trustee: Nakheel Development Limited Obligor/Guarantor: Nakheel (as Obligor) Dubai World (as Guarantor) Tenor: 3 years Pricing: 6.345% Date of Distribution: 14 day of June and December each year Maturity Date: 14 December 2009
Nakheel - Continued Governing Law: English Law and UAE Law Shari a Advisor: Shari a advisory board of Dubai Islamic Bank Use of Sukuk proceeds: Fund the development of a number of projects including Jebel Ali Village, Jumeriah Islands, Dubai Promenade, the Lost City, Jumeirah Park and Jumeirah Village, Dubai Waterfront and International City Distinguishing Factors: Second convertible note offering (first being Ports Customs & Free Zone Corporation) Transaction Documents: Offering Circular Trust Deed Purchase Agreement Lease Agreement Purchase Undertaking Sale Undertaking Guarantees Security Share Pledge and Real Property Mortgage Subscription Rights Sale Undertaking Agency Agreement Costs Undertaking
Nakheel - Continued Nakheel Holdings 2 as PQO Obligor Nakheel Holdings 1 as Seller Nakheel Holdings 2 as Obligor Sale of long Leasehold Process QPO Shares Subscription Rights Sale Undertaking QPO Subscription Moneys Sale of long Leasehold Relevant Exercise Price Purchase Undertaking Dubai World Dubai Word Guarantee Nakheel Holdings 2 as Lessee Rental Lease Nakheel Development Limited as Issuer Co-Obligor Guarantee Nakheel Holdings 1, Nakheel Holdings 2, Nakheel Holding 3 Declaration of Trust Share Pledges and Mortgages QPO Shares QPO Subscription Moneys Sukuk Proceeds Periodic Distribution Amounts, Final Distribution Amounts Additional Distribution Amounts Sukuk issue Amount Nakheel Holdings 1 Investors
Other Sovereign and Quasi- Sovereign Sukuk Issuances Earmarked
Other Sovereign and Quasi-Sovereign Sukuk Issuances Earmarked Western economies United Kingdom The UK has introduced legislation to prevent the double taxation of assets taking place under an Ijara and has proposed new regulations to support Islamic finance and the issuance of a corporate sukuk within the UK France The French government is rumored to be considering a sovereign sukuk issuance, which will be the first of its kind in France Japan - The Japan Bank for International Cooperation is planning a 7 year tenor sukuk targeting GCC investors with a value of between US$150,000,000 to US$200,000,000 South Korea The finance ministry had proposed a revision to the tax code with the aim of treating sukuk as bonds so that South Korean issuers could receive the same tax advantage as those applied to conventional bond issuers
Other Sovereign and Quasi-Sovereign Sukuk Issuances Earmarked - Continued Emerging economies Indonesia Indonesia has announced a US$1,000,000,000 sovereign sukuk which is expected to pay a yield of 5.125% Malaysia - Malaysia s Tenaga Nasional Bhd may issue a sukuk of up to US$1,500,000,000 in 2011 in order to raise funds to build 2 new power plants Saudi Arabia The Saudi General Authority of Civil Aviation is rumored to be considering SAR 4,500,000,000 sukuk to finance part of a new terminal at Jeddah airport Philippines The Philippines government has announced plans to issue a US$1,000,000,000 sovereign sukuk which will be the first issuance of its kind in the Philippines. The Philippines does not currently have a regulatory framework in place for Islamic banking
Private Sukuk Issuance
Durrat Khaleej Al-Bahrain Issuer: Durrat Sukuk Company B.S.C.(c) Issue Date: 25 January 2005 Sukuk Size: US$120,000,000 Sukuk Structure: Istisna a and Ijara Trust Assets: The Durrat Project Managers: Kuwait Finance House and Liquidity Management Centre Listing: Bahrain Stock Exchange Issuer/Trustee: Durrat Sukuk Company B.S.C.(c) Obligor: Durrat Al Bahrain Tenor: 5 years Pricing: 3 months LIBOR + 125 bps Distribution: 25 day of January, April, July and October each year
Durrat Khaleej Al-Bahrain - Continued Maturity Date: 2009 Governing Law: English Law Shari a Advisor: The Shari a Supervisory Board of Kuwait Finance House Use of Sukuk proceeds: Fund the construction of the first phase of the US$1 billion Durrat Al-Bahrain Project Transaction Documents: Offering Circular Master Istisna a Agreement Master Ijara Agreement Master Service Agency Agreement Project Manager Appointment Agency Agreement Investment Agency Agreement Subscription Agreement Deed of Security Agency Agreement Costs Undertaking
Durrat Khaleej Al-Bahrain - Continued Customers Sale Proceeds Retail Sales Durrat Khaleej Al Bahrain Company B.S.C. (c) as Project Company A B C D E Durrat Sukuk Company B.S.C. (c) as Issuer Sukuk Sukuk Proceeds Investors Reclaimed Land and Infrastructure Master Istisna a Agreement Contractors A Licence, B Security over Property, C Lease of Base Infrastructure D Ijarah Payments, E Delivery of Reclaimed Land and Base Infrastructure
Al Thani Issue Date: 3 October 2007 Sukuk Size: US$100,000,000 Sukuk Structure: Musharaka Trust Assets: Al Bustan Centre and Dubai Wholesale Plaza Managers: Dubai Islamic Bank (as Lead Manager), Bahrain Islamic Bank and Khaleeji Commercial Bank (as Co-Lead Managers) and Emirates Islamic Bank and Liquidity Management Centre (as Arrangers) Issuer/Trustee: Thani Investments Sukuk Company Limited Obligor: Thani Investments LLC Tenor: 5 years Pricing: 6 months LIBOR + 250bps Distribution: 3 April and 3 October each year Maturity Date: October 2012
Al Thani - Continued Governing Law: English Law and UAE Law Shari a Advisor: Shari a Supervisory Board of Liquidity Management Centre Use of Sukuk proceeds: Refinance existing debt and to enhance its real estate and property development division Transaction Documents: Offering Circular Trust Deed Musharaka Agreement Management Agreement Purchase Undertaking Sale Undertaking Security Real Property Mortgages Agency Agreement Costs Undertaking
Al Thani - Continued Musharaka Operating Account Periodic Distribution Amounts Dissolution Distribution Amounts Investors Musharaka Revenues Sukuk Subscription Proceed Trust Certificates Thani Investments LLC as Obligor In-Kind contribution to the Musharaka Capital Management Agreement Musharaka Thani Investments Sukuk Company Limited as Issuer and Trustee Sukuk Proceeds contribution to the Musharaka Capital Real Estate and Property Development
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